In this online trading world, it is essential for traders to consult the right forex broker for their successful trading. Choosing a reliable broker is foremost the most important step for every trader.

According to this study, victims of fraudsters lost over £27 million in 2018/19, which is a huge number. That is why studying your broker before investing any capital is important. Selecting the right broker might be difficult and confusing for you. In this article, we have collected the most important factors for traders before they find the right forex broker. So you can make informed decisions for the trading journey.

Without further ado, let’s dive into it.

What is a Forex Broker?

A forex broker provides traders access to buy and sell foreign currencies. These broker companies also provide different platforms to the traders where they can execute their trades. Furthermore, these brokers also offer its traders educational content such as tutorials, books, PDFs, and more.

These are the currencies most traded on foreign exchange markets such as the US dollar, (US) Euro (EUR), Pound Sterling (GBP), New Zealand dollar (NZD), Australian dollar (AUD), Canadian Dollar (CAD), Japanese YEN (JPY), and Swiss Franc (CHF).

Keep in mind that most of the forex brokerage companies charge particular fees for their provided software for trading.

Top 11 Factors to Consider For Forex Brokers

 

Check the Type of Broker

It is one of the vital factors to consider before choosing a forex broker. You should know how these brokers operate in the forex market. Here are the types of brokers:

Market Makers

These are the ones who take responsibility for the risks. They make the market viable by providing liquidity. These brokers provide buy and sell quotes to the clients for currency pairs. These brokers earn profit from the spread.

For example, if the bid price is $800 and the asking price is $802, the $2 is the spread. That is how Market Makers are awarded.

Straight Through Processing (STP) Brokers

STP brokers are the ones who provide liquidity to clients without any intervention or market activities. As there are no inferences, the trades are executed at a much faster rate. These brokers earn through spreads and commissions.

Electronic Communication Network (ECN) Brokers

ECN brokers leverage electronic communication networks to give access to their clients about other investors in currency markets and equity. This network matches the buy and sell order when the traders come to execute their trades.

For example, if the spread of the EUR/USD is one for 13000/13001 for all the brokers. The ECN broker will take this one spread and add a couple of more spreads for its traders; they’ll quote the price 12999/13002, which is three spreads.

Type of Accounts

There are different types of accounts available such as standard, micro, mini, and VIP. These accounts are based on the deposited capital. Forex broker companies provide these accounts for the trader’s preferences and needs.

Micro and Mini’s accounts are traded in 10,000 or 1000 units lots, while the standard account has a minimum of 100,000 units. Mini and Micro accounts are for those who are looking to start trading with small investments. So, make sure to check broker accounts matches your needs.

Authorized by Financial Regulations

It is mandatory for a brokerage company to be regulated by financial authorities. The broker companies of each country have their own regulatory bodies. Some of the regulatory bodies are the Financial Conduct Authority (FCA) in the United Kingdom, the Australian Securities and Investments Commission (ASIC) in Australia, the Commodity Futures Trading Commission (CFTC) in the United States, and the Cyprus Securities and Exchange Commission (CySEC) in Cyprus.

Regulated brokers ensure and safeguard traders’ capital, provide fair and transparent trading practices, and maintain integrity. So, it is important for you to open your trading accounts with regulated brokers only.

Customer Service

Customer service is also a main factor before you consult any forex broker company. It is indispensable for brokers to have excellent customer service for traders. Great customer service will help you get answers to your queries about the trading platform and how things work.

In addition, you can read the customer reviews on the company website about customer service and get an idea about their service.

Commission, Spreads, and Fee

You must check the commission, spreads, and trading costs of a brokerage company. Most of the companies do not charge a commission. Instead, they cover their expenses with a wider spread on the currency, such as EUR/USD.

Furthermore, the spread and commission may also vary on the account types offered by the broker. Some accounts have low spread, but a commission is also charged separately. There is another term called Swaps, which is also important for you to understand. It’s for those traders who hold positions overnight. It can be either positive or negative based on the currency pair.

Margin and Leverage

Margin and Leverage are two vital concepts in forex trading, which traders leverage to increase their trading power. As a trader, it is indispensable for you to be aware of the margin requirements and Leverage offered by the brokerage company, as these can impact the potential risk exposure and the amount of capital.

When trading with Leverage, you can utilize risk management practices, such as setting stop-loss orders and using appropriate positions. Please note that where there is high Leverage, there are more chances of risks.

Availability of Demo Account

It is essential for every broker company to have a demo account for its traders. A demo account helps the trader understand the platform, practice different trading strategies, and trade without risks.

Furthermore, beginner traders can also explore various functions and features of the trading platform offered by the broker. Traders can also stimulate market conditions with the demo account, allowing them to understand how the prices of currency pairs behave and move. So, consult those broker companies with demo accounts available for the traders.

Withdrawal And Deposit Methods

Every forex broker company has different ways of withdrawing and depositing processes. Therefore, it is important for you to find out what type of funding methods the broker has on its platform. It also acknowledges whether your country has a certain payment method available.

Every brokerage company accepts payment methods such as PayPal, Skrill, credit/debit cards, Bank Wire Transfers, E-Wallets, and cryptocurrencies.

In addition, it is vital for you to know that brokers could have particular policies, processing times, and costs related to making deposits and withdrawals. Before choosing the best alternative for their purposes, traders should carefully consider the available techniques, associated expenses, and any constraints.

Educational Content and Forex Trading Tools

Education contents and advanced trading tools help traders in their trading and make it easier to understand the platform. Every trader must have educational content such as blogs, webinars, E-books, tutorial videos, and guidance. This education content should involve conceivable information trading strategies, technical analysis, risk management, and a lot of other terms.

Moreover, advanced forex trading tools, such as economic calendars, real-time price charts, etc., are also important. These tools help traders to analyze market conditions, economic news, and price movements. Therefore, consult companies with valuable educational content and trading tools.

Reputation of the Broker

The reputation reflects the quality of the services of a forex broker. You can analyze the reputation of a forex broker company by reading the reviews given by their customers on their website and other forums. It will inform you about the broker and whether it is reliable to open a trading account.

You can also compare other brokers, conduct market research, and consider other factors (which we have described above).

Conclusion

To make the long story short, it is foremost for every trader to analyze, study, and find information about the brokerage company before opening a live trading account. Financial regulations, customer service, spread & commission, margin & Leverage, and education content are some of the important factors which we have mentioned above. It is advisable to do your own research on forex broker companies to know more about them.